National Consumer Disputes Redressal Commission (NCDRC): The instant matter alleged deficiency in service by Oriental Insurance Company over repudiation of insurance claim in respect of a risk fully covered under the Standard Fire & Special Perils Policy (Material Damage), the duration whereof was between 10-05-2012 to 30-04-2013. The Insurance coverage was regarding plant, machinery, buildings etc., and the specific items covered included all Turbo Generator-sets. The sum insured was Rs.402,11,19,000. The Bench of A.P Sahi, J., (President) and Inderjit Singh (Member) based on their findings, held that the letter of repudiation deserves a rejection and the Exclusion clause in the insurance policy will not come to the aid of Oriental Insurance.
The NCDRC directed Oriental Insurance to pay the indemnifiable amount of Rs 13,25,37,131, as was assessed by the surveyor.
Background:
On 08-08-2012, a major breakdown took place causing damage to Turbo Generator-4 (TGSet-4) that was installed in 2010 by National Aluminum Company Ltd., (NALCO). It was stated that the mishap took place on account of a fire that emanated at the Exciter end of the equipment.
The insurance company appointed surveyors to investigate the damage, who externally surveyed the site but could not ascertain the cause of fire, which according to them could be known once the Generator could be dismantled and inspected by the engineers of BHEL.
The engineers of BHEL later inspected damaged TG and it was observed that the vibration values had gone high during the failure. Overall, there was heavy damage to generator, load gear and exciter components. Thereafter, a final survey was carried by the insurance company and in their report, it was stated that since the fire, occasioned by electrical short-circuiting, had originated inside the Alternator of the Generator and had not spread to any other machine, the claim clearly falls under the electrical exclusion (Clause 7) of the policy and hence the Insurer’s liability will not attach in this case. The complainants pressed for a review, but to no success.
Aggrieved, the Complainant company questioned the correctness of the repudiation and alleging non-applicability of the exclusion clause urging that this is a deficiency on the part of the insurance company, as it has wrongly applied the said exclusionary clause to erroneously decline the genuine claim of the Complainant.
Contentions:
Counsels for the complainant argued that that the fire emanated from the Exciter end which in turn caused damage to the generator and since the Exciter is in itself a separate component, therefore the fire that emanated from the Exciter travelled to the generator and caused damage. The complainant submitted that the loss was occasioned on account of the fire having emanated in the Exciter that had damaged the generator and in such a situation the exclusion clause would not apply and hence the claim in respect of the damage to the specific parts mentioned in the claim are indemnifiable. It was urged that the parts mentioned are separate distinct parts of machinery that were damaged due to the said incident, and which is supported by the expert report of BHEL engineers, hence the fire loss is a covered risk and not excluded under clause 7.
The complainants further submitted that once it is established that the fire originated at the Exciter and the other equipment had been damaged due to the fire so propagated, as explained by the experts, the exclusion clause should be read to be not applicable, and the claim deserves to be indemnified. The fire was external to the generator as it was sourced and originated from the Exciter.
Per contra, counsels for the insurance company argued that that even though as per the surveyors report the fire had generated inside the generator, the said claim is not indemnifiable as per the exclusion clause and even otherwise the Exciter is a necessary component of the Turbo Generator and is a part of it. It was submitted that the Exciter is not a separate machine and according to the manufacturers themselves the entire Turbo Generator-4 was manufactured as required by the Complainants and installed as a whole equipment for generating electricity.
The insurance company further argued that the claim was about the Turbo Generator Set which is one whole equipment, and even if the fire had generated from any of the Components, the same was from within and not from outside. Consequently, the exclusion clause in strict terms was rightly invoked to repudiate the claim as any such incident of fire occurring within the equipment and causing any loss is not indemnifiable. It was reiterated that there was no external cause of fire and on the other hand the fire which emanated in the equipment namely the Turbo Generator-4 had not damaged any other machinery or fixture so as to give rise to an indemnifiable claim. Therefore, the complainant’s claim cannot succeed by splitting up the parts of the same equipment which was clearly understood between the parties in their communications to be a loss caused to the Turbo Generator Set and not to any one single component that was to be treated separately.
Assessment
Perusing the matter, the NCDRC noted that the dispute therefore centers around the source where the fire emanated and the impact of the fire causing any damage to the equipment as well as the source of the impact causing the damage to attract or detract the exclusionary clause.
The Commission noted and found that the final surveyor submitted its report on 14-09-2012. However, prior to the repudiation, the report dated 30-08-2012 of the experts from BHEL according to the insurance company had already been sent to the surveyor on 06-12-2013. Thus, it is correct that the said report was not with the final surveyor when he tendered his report in 2012, but it was with the insurance company when it repudiated the claim on 12-06-2014.
Taking note of the expert report, which stated that in all probability fire emanated from the Exciter and had explained the same stepwise, the NCDRC pointed out that the contention of the insurance company therefore does not seem to clinchingly contradict the expert evidence and there is no other material to disbelieve the opinion of the experts. Thus, insurance company’s contention about the fire having emanated only from within the alternator of the generator is selective whereas the contention of the Complainant which is right from the beginning asserting that the fire emanated from the Exciter end supported by the expert opinion dated 30-12-2012. The insurance company has not led any evidence or expert opinion to establish the allegation of the failure of the insulation being the root cause. Thus, weighing the probabilities of the expert opinion, the same appeared to be credit worthy for the NCDRC and therefore merited acceptance. The fire originated at the Exciter end due to vibration as the stator was dislodged, the TG-gear box was uprooted, the coupling was broken, and the expansion was dislocated. This was also observed in the preliminary report of the surveyor of the spot survey.
Taking note of the real issue between the parties as whether the exclusion clause was attracted to the facts of the instant case, the Commission deliberated whether the Exciter can be held to be an independent separate machinery existing by itself altogether or the generator can be delinked from the Exciter so as to treat the TG-4 Set as consisting of different components and not a complete unit for the purpose of the Exclusion Clause.
Considering the dictionary meaning of Exciter, the Commission noted that an Exciter is equipment relating to electric activity. It is an agent that arouses or sets into motion another equipment. It has been defined to be a small dynamo used for exciting the magnets of an electric generator. Exciter as an apparatus or a machine used as a small auxiliary dynamo to energize the field magnets of a dynamo. It is a device to charge the plates of an electrostatic generator. Essentially it is a sparking device to generate electric waves. Earlier a magnet electric machine served as a separate Exciter that was later on dispensed with technological developments whereby the whole or part of the current produced by the armature was used to excite its own electromagnet.
Taking a clue from the said definition, the NCDRC stated that if the Exciter is an auxiliary component, then it is something to help, assist, aid or support the operation of the machine. It is, therefore, a facilitator for its operation.
Considering whether Exciter can be treated to be a split separate component from the generator and whether it can be treated as a segregated and separate part of the equipment unconnected or alien to the generator. The NCDRC noted that accident as reported by the Complainant was about the TG-IV Set but at the same time the origin of fire was “from the exciter end” and fire was also seen in the generator. The surveyor did not discuss the impact of vibrations causing the fire. The report of the surveyor simply focused on locating the fire inside the generator without attempting any analysis of the cause of vibrations or the damage occurring there from as elaborately explained by the OEM report dated 30-08-2012. The surveyor admits the contradiction only in the location of the fire but does not discuss the impact of vibration even in the addendum report dated 05-10-2015.
The NCDRC pointed out that Exciter is an essential equipment that exists to run the generator. It is indispensable but it is a component that needs to be coupled and combined simultaneously but it exists as a distinct separate component. It is not part of the generator but a component that is a necessary external adjunct and is coupled with the generator. It was evident that neither the preliminary survey report, nor the final survey report or the repudiation letters anywhere refer to this aspect of the exciter either being attached or detached from the generator. It is evident that the Turbo Generating Set may have been purchased and assembled but it has four separate components comprising of a turbine, gear box, a generator and an exciter.
The NCDRC stated that the report of the experts is authentic as it contains a specific empirical analysis of the cause of the fire whereas the report of the surveyor has not analyzed the same. The NCDRC thus accepted the report of experts regarding the cause of the fire being vibrations, the location of the fire in the exciter and then its propagation and travelling up to the generator. The NCDRC found that that the cause of fire was an external element of an uprooting of the equipment due to heavy vibrations that ultimately resulted in causing the sparks and setting the fire in the exciter which travelled up to the generator. The damage was therefore not only because of a simple spark generated inside the alternator of the generator as alleged by the surveyor.
The expert opinion and the narrative of incidents stepwise as well as the disclosure as well as the evidence led by the complainants clearly indicates the fire emanating from the exciter end which was the case of the Complainants right from the beginning and stood confirmed by the experts report. The NCDRC therefore found that the loss caused does not stand excluded under the exclusion clause which does not in any way exclude fire caused on account of vibrations. “This was not an internal spark but it was a heavy vibrations that the roter and the other components rubbed causing the spark of fire at the exciter end that propagated towards the generator. The exclusion clause therefore would not apply and even otherwise once we find that vibration is not excluded, we would also invoke the rule of Contra Preferentem to remove any doubt of ambiguity in the exclusion clause and extend the benefit to the complaint. It is not the case of the insurance company that the machine was overrun, damaged or excessive pressure or any defect of self-heating as mentioned in Exclusion Clause No.7”.
[National Aluminum Co. Ltd. v. Oriental Insurance Co., CONSUMER CASE NO. 2159 OF 2016, decided on 15-10-2024]
Advocates who appeared in this case :
For The Complainant: Mr. Abhishek Gupta, Advocate with Mr. Vaibhav Dayma, Advocate
For the Opp. Party: Mr. Pankaj Seth, Advocate Mr. Khushi Sachdeva, Advocate
The post appeared first on .